Federal agencies agree to cooperate on gas price investigation
For the second time in three years, gas prices are quickly heading toward the $4 per gallon mark. Now, two federal agencies have signed an agreement intended to help fight manipulation of the petroleum market. The effects of this increased enforcement, however, could be difficult to discern.
Federal Trade Commission tries to address gas prices
In late 2008, gas prices quickly rose up and above $4 per gallon. About one year later, the Federal Trade Commission signed a “Final Rule” that officially prohibited “fraud or deceit in wholesale petroleum markets, and omissions of material information that are likely to distort petroleum markets.” Since the issuance of this rule, the FTC has been investigating possible manipulations that could be increasing the cost of oil, and therefore fuel. Despite these investigations, the FTC has not officially charged or fined any company with manipulation.
FTC and CFTC agree to cooperate
The Commodity Futures Trading Commission (CFTC) is a smaller agency than the Federal Trade Commission, with a much narrower focus. Commodities and Futures are products that make financial investments in physical products, rather than companies. Today, the CFTC and FTC signed a “Memorandum of Understanding” that allows the two agencies to share non-public information about the fuel market. This sharing of information is intended to give both agencies a broader view of the petroleum market, and hopefully ferret out abuses and manipulations in the market.
What affects fuel prices
Gas and fuel prices, like all product prices, are affected by a variety of factors. A jump in oil prices takes a few months to reach market as fuel prices, and consumers often feel the pinch. Geopolitical conflicts, costs of refining, demand for fuel and even the cost of crops all effect the price of fuel. Consumer sentiment also has a strong effect, and nervousness about fuel prices can be a self-feeding loop that increases prices. There are often accusations of oil companies gouging on fuel prices, though the FTC and CFTC rarely find enough evidence to prosecute perceived offenders.